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The UK Chocolate market

1) "It is said that life without chocolate is like a beach without water" (Christou, 2009). The UK Chocolate market is the largest
within the European Union (30 percent of the EU market) with British citizens consuming more chocolate than any other EU nation (Barnett, 2006). Within the
UK adults are the primary consumers eating £3.5 billion a year compared to children who consume £390 million a year, with the over 55's the highest
consumers of all adults (Scott-Thomas, 2009) Twenty-one per cent of the total chocolate and confectionery sold in Britain is consumed by people above the
age of 55, who spend on average £700 yearly (Datamonitor, 2005).

Within the UK the main manufacturers are as follows:

Chocolate manufacturers by sales and share (Mintel, 2009)

2009

2007

2005

% change

£m

%

£m

%

£m

%

2005-07

1

Cadbury Trebor Basset

1189

35.3

1101

34.9

1146

34

3.8

2

Masterfoods (Mars)

1010

30

953

30.2

914

27

10.5

3

Nestlé

494

14.7

470

14.9

672

20

-26.6

4

Ferrero

134

4

126

4

118

4

13.2

5

Kraft Foods

61

1.8

63

2

141

4

-56.7

Own-label

217

6.5

189

6

124

4

75.3

Others

260

7.7

252

8

245

7

6.2

Total

3365

100

3154

100

3360

100

0.1

The current market can be broken down into the following segments:
Boxed;
chocolate assortment composing of a selection of high-added-value individual units
(Booth, 1990)
Countlines;
chocolate-covered bars with an individual centre which can be eaten with one hand, so called named because these items are sold by number rather than
weight.
Moulded Bars
; regular bars of chocolate with or without inclusions i.e. nuts or filled centres i.e. soft caramels
Seasonal Chocolate
: chocolate confectionary produced for Easter through 'eggs' and Christmas in 'gift boxes' and 'miniatures'
Straightlines
; small items which are identical and eaten as casual snacks on the move i.e. Cadbury's chocolate buttons
Other Chocolate Confectionary/ Assortments;
other
The below table suggests that the most revenue generating segment using recent data is 'countlines' @ 2244.44 €millions.

Seasonality:
The chocolate industry is highly seasonal where peak seasons of Easter and Christmas observe a sharp increase in sales. Therefore if externalities affect
these periods it can be assumed that performance will be severely curtailed. The recent recession over the Christmas period impaired consumer spending
therefore to mitigate the loss of sales it is essential to maximise them over the Easter period 2010.

Failure of new products
Numerous new product launches have failed over the past few years where many companies have adapted the strategy of re-launching old favourites to leverage
on their brand equity and consumer recognition.

Barriers to Entry
The chocolate industry is synonymous with a number of large firms (Mars, Nestle and Cadbury) dominating the market, enjoying a well established history and
therefore high brand loyalty. Consequently barriers to entry are high for existing incumbents and new entrants.

Increasing Cost of Raw Products
As cost of raw products rise such as cocoa, chocolate manufacturers are shifting their attention away from marketing strategies and instead focusing on the
input processes of chocolate making as opposed to the output.

Potential Partnerships
Given a saturated market and a continuous increase of raw material prices, to remain competitive and keep costs down, creation of partnerships are
potential business propositions for manufacturers.

Growth of luxury segment of market
Luxury dark chocolate brands have entered the market in (Booth, 2000) due to the advocates of healthy eating and the anti-oxidant benefits of dark
chocolate. Targeting the 'grey pound' with a larger disposable income the luxury segment is increasing in market share presently.

2.
The highly competitive UK chocolate confectionary market has suffered a hit during the 2008/9 recession where volume sales have decreased by 2.6 percent
(Nielsen, 2009) throughout all leading brands. However this fall in sales contradicts the trend which has emerged throughout the recession of an observed
increase in comfort eating such as chocolate within the 'affordable' segment of the market. Currently the chocolate industry is saturated with increasing
pressure from unfavourable economic conditions squeezing profit margins and manufacturers consequently looking for new growth areas.

Segmentation targeting and positioningSegment of Chocolate Industry –'Countlines'
Analysis of the industry suggests that the most revenue generating segment belongs to the 'countlines' segment at 2244.44 € million yearly, making this a
potential area for diversification for JFL. Consumption of these modern snacks such as Snickers represent a growing sector of the confectionary market as
they subscribe well into 'on-the-go' lifestyles which compliment modern society. Easily fitted into handbags, suit pockets and sportswear countlines are
convenient snacks in a variety of choices which make them ideal for busy people everywhere. As per the above table and market research competitors brands
within this segment are:
'Mars' 49 g @ 40p
'Twix' 58 g @ 45p
'Mars Snickers' 58 g @ 45p
'Cadbury Dairy Milk' 49 g @ 58p
'Green and Blacks Organic' 50g @ £1.25

Positioning – 'Pocket Money Segment to luxurious treats'
There is a decline in the ''pocket money' segment of the confectionery market due to increasing health concerns over children's increasing sugar intake.
Market research evidences that it's the 11-14 year old segment of children who spend the most on weekly pocket money with expenditures of £10 – 15 (Youth
TGI, 2009). Linking this to the entry strategy for JFL within the chocolate industry and the consumer's propensity towards familiar brands and pricing
structures; it is recommended that entry into the 'countlines' segment should be positioned within the 'pocket- money' segment. This should be at the lower
end for 'tweens' and the higher end for the 'over 55's'. Another suggestion is that JFL 'partner' with another manufacturer such as
Nestle to leverage on brand credibility and reduce start-up costs into the market, especially with increasing raw material prices. The risk of
cannibalisation will be mitigated due to product launch into different segments.

Consumer Segmentation – 'Over 55's'
Given that the over 55's are the biggest consumers of chocolate with a larger disposable income it is recommended therefore that JFL position themselves at
the premium end of the 'pocket money' 'countlines' segment. Building on the notion that the 'health food' chocolate market is growing due to its
anti-oxidant benefits it is recommended that JFL target the 'grey pound' with a product which offers health benefits (increased anti- oxidants, reduced
saturated fats) which is perceived to be of superior quality.

Consumer Segmentation - 'Tweens 11-14'
Building upon the increasing disposable income of this segment and the reputable brand image that JFL has built within sugar confectionary it is
recommended that JFL target this segment for entry into the market. Offering a product which is half the size of an average chocolate bar: at 25g within
the 'countlines' segment this will enable JFL to remain competitive on cost whilst leveraging the Nestle brand.
3.
Product description;
'Over 55's'
- An average sized premium chocolate bar (50g) specifically formulated to contain increased levels of anti-oxidant properties in the form of flavonoids,
found in cocoa processed with minimal extraction and reduced milk content. Lines can be either solid chocolate classified as 'premium milk with added
cocoa' or individual centres of nut or coconut covered with 'premium milk with added cocoa'.
'Tweens 11-14'
– A mini-bar of 25g formulated with milk chocolate where lines can be either solid milk chocolate or individual centres of toffee, caramel and nuts.

Brand image;
'Over 55's'
– The branding of 'premium healthy chocolate' to this segment should demonstrate one which will communicate the health benefits of eating chocolate rich in
anti-oxidants. The differentiating factor with this brand is the fact that it is milk chocolate with added cocoa, for 'a premium creamy milk chocolaty taste with all the anti-oxidants of dark chocolate'. The reason for this is the baby boomer generation (over 55s)
has been evidenced as possessing an extremely 'sweet tooth', which create preferences towards sweeter milk chocolate rather than bitter dark chocolate.
Therefore a bar which can be sold as milk with added benefits of dark will appeal to the psychology of this segment.
'Tweens 11-14' –
The branding of the mini-bars, it is recommended will leverage Nestles brand and associated products such as breakfast cereal (Shredded Wheat, Cheerio's,
Golden Nuggets, Clusters) beverages (coffee, hot chocolate and Nesquik) and ice-cream. These are items which this segment of the market consume regularly,
even on a daily basis, therefore creating this relationship between the new product of 'mini-bar' and household names will re-enforce brand identity.

Pricing objectives strategy;
'Over 55's'
– The price of this product should reflect its position within the 'higher end' of the 'pocket money' segment of 'countlines'. The average weekly
expenditure on chocolate confectionary for the 'grey pound' is £13.50 per week (£700 per person annually) with buying behaviour of chocolate in the luxury
end of the market a few times a week i.e. 'Green and Blacks Organic' 50g @ £1.25. It is recommended that the price per bar of this product (50g) should be
positioned just below the premium price but substantially above the lowest price of counterline competitors bars at 40p. Therefore the price for this
product should be pitched at 80p per 50g bar.

'Tweens 11-14' – The average weekly expenditure within the pocket money segment is at the lowest range £10 min - £15 maximum (£520 – 780 per
person annually) with buying behaviour at the lowest end of the market with daily purchases of chocolate. It is recommended that the price per mini- bar of
this product (50g) should be positioned just below the lowest price of counterline competitors bars at 40p. Therefore the price for this product should be
pitched at 30p per 25g bar.

Retailing and distribution objectives and strategies;
'Over 55's'–
Distribution channels for chocolate are wide, with chocolate availability the highest it have ever been, from small retailers to mass-market outlets. To
maximise product launch it is recommended leveraging on current trends such as increasing internet usage to distribute the product. The advantages of this
distribution channel are that it is cost effective, can penetrate a wide market quickly and once set-up is easy to maintain. For this segment who are
becoming more technology 'savvy' and have availability to the net this distribution channel will be successful.

'Tweens 11-14'– Distribution for this segment follows the above, and builds on existing channels of all sizes of retailers to
mass-market outlets. Given the proposed partnership with Nestle and their grocery products such as breakfast cereal and beverages, it is recommended that
using coffee shops, supermarkets and ice-cream outlets will increase sales of the 'mini-bar'. Additionally the internet for this segment is a must given
the trend towards online purchases.

Integrated marketing communications' objectives strategies;
'Over 55's' -
For this segment the IMC strategy will encompass promotional strategies which will use venues such as golf clubs, day centres, community leisure centres,
gymnasiums and supermarkets to launch the product. The promotional aspect should encompass 'EMarketing' linked to offers, which when advertised at the
above mentioned outlets customers will receive a specified discount if they print out a voucher online which is redeemable.

'Tweens 11-14'- It is recommended using an IMC strategy which can be integrated into Nestles existing marketing plan so as to 1) drive down
promotional costs 2) leverage existing expertise within Nestle and 3) build on existing marketing strategies. Extra consideration will be taken to ensure
that cannibalisation does not occur through alignment of segmentation against current Nestle chocolate. 'EMarketing' will be used as above for promotion
using the same redeemable voucher offer.

Evaluation and control;
To see whether your product launch has been successful it is recommended that JFL implement a metric which enables accurate measurement of sales within
both lines. As the predominant form of distribution and promotion is online, converted sales can be measured through CTR (click through rates).
Additionally measurement can be through response rates and online users to the JFL website. For control it is recommended allocating one employee per line
who has expertise within EMarketing.

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